🦄 vol. 10
karl and claude chat about nfts and the rise of neobanks
digital dash 💸
"Everydays - The First 5000 Days", a $69.3 million (😳 ) non-fungible token (NFT) showcasing a collage of Beeple's earlier artworks. The artist created pictures everyday, start to finish, from the 1st of May 2007 - with his first picture on the top left corner of his opus. The bottom right has picture number 5 000, however I believe we're currently on the 5 256th picture (should he not buckle before this is released).
Wtf is an NFT? 🤔
Simply put, non-fungible tokens or NFTs are digital assets that aren't fungible. Fungibility refers to the interchangeability of an asset, something that is fungible is not unique and has equal value to something else allowing it to be exchanged, like for like e.g. money or Bitcoin. An NFT is a unique digital asset that cannot be duplicated, its identity is held securely and transparently on a blockchain.
Context Please 🕵🏽♂️
To put things into perspective, Beeple's Opus is currently the most expensive NFT sale in history and it represents around 2.5% of NFT sales made in H1 of 2021. The growth in the sector is astonishing, comparing the NFT sales from H1 of 2020 ($13.7 million) to that of 2021 ($2.5 billion), equates to over 18 148% of growth. The global art market shrank to $50.1 billion in 2020 (from $64.4 billion in 2019) but online sales doubled, from $6 billion in 2019 to $12.4 billion in 2020 now accounting for 25% of the global art market and NFTs are a third of that, according to the Art Basel And UBS 2021 Global Art Market Report.
The Future 🔮
Okay, you get it - a lot of fast growth and material numbers but they're important because the digital market is on track to surpass the physical. Need proof? Let's look elsewhere:
Digital advertising is set to comprise more than 50% of total ad budgets in the US.
Digital viewership, with 1.1 billion online video streamers worldwide, up 26% from 2019 according to Forbes, is on the cusp of overtaking the theatrical entertainment market (Box Office etc.).
Digital shopping, slightly further behind, is etching closer to physical shopping. Online share of total retail sales rose from 16% in 2019 to 19% in 2020, with online share in countries such as the Republic of Korea already exceeding a quarter of total sales.
Digital art, welcome NFTs - as shown above.
NFTs have already revolutionised ownership, putting the power in the hands of artists and creators, allowing them to fully capitalise on their work - cutting out middlemen. However, they are only one piece of the puzzle. NFTs are part of a greater move to a decentralised society. As we move forward we will look to unpack more of this puzzle, looking into blockchain, cryptocurrencies (like Bitclout from vol.1), DeFi, DAOs and all else decentralised.
bricks to clicks 🤳
When you think of a bank what do you see? Vaults, guns, masks, shootouts, cash-filled duffle bags, getaway cars, high speed chases..
Ok fine.. Hollywood aside, traditional banking brings to mind brick-and-mortar buildings, malfunctioning ATMs, long queues where 2/6 tellers are present, passport photos, utility bills (no older than 3 months) to confirm your address. The list goes on.
Enter neobanks 💡
This is exactly the sort of bad customer experience that drove Nubank co-founder David Vélez to create an alternative solution, and over the last decade many others have come up.
Neobanks are a type of direct bank that operate exclusively online without traditional physical branch networks. There are two types of neobanks:
Full stack neobanks: These have their own banking license, and can operate independently.
Front-end neobanks: These do not have their own banking license and have to partner with traditional banks to provide services.
But my bank already has an app? 🤨
It is true that in recent years, traditional banks have been making an effort to digitise their external offerings with mobile and online banking applications that allow you to view statements, make payments and transfers etc. However, these are simply a porting of the traditional system functionality. Outside of the convenience of not having to visit a physical branch, a bank statement on your phone is still just a bank statement.
Jason Bates, the co-founder of Monzo, emphasises that there is a distinction between digitised banking and digital banking. Neobanks are concerned with leveraging truly digital capabilities to deliver valuable services to customers who are underserved or overcharged.
Truly digital? 🤖
To break this down, the concept of Digital R.I.C.H.E.S is useful. Truly digital services are:
Real time - We can do better than digital bank statements. We can provide instant insights into spending. We can put in place feedback mechanisms to positively influence customer behavior in real time.
Intelligent - Using the data we have on consumers to treat them more as individuals with bespoke offerings.
Contextual - Our mobile devices avail us with a wealth of information; location, proximity, time etc. This data can be used to curate more elaborate automated customer experiences beyond the norm of simple debit orders. For example, activating travel insurance when you've booked a flight.
Human - Current financial services by and large do not facilitate optimal communication to users (e.g. bank letters, websites etc. can be communicated more conversationally).
Extended - Current banking services operate as silos. APIs can be availed and decentralised micro-services integrated together to provide a high quality end-to-end experience.
Social - Currently, banking is an individual experience. Greater collaboration and visibility could extend services to communities. Think peer-to-peer lending etc.
Leveraging truly digital capabilities opens the door for higher-order services that address the actual needs customers have. When a customer is performing operations on their account, they might want:
Analytics into how they are performing financially against past months instead of reading a statement
Make a remittance payment to their relatives in another country.
Diversify by investing their savings into cryptocurrencies.
These are all potential higher order services to be offered. You find that many up-and-coming neobanks are directly targeting these niche use-cases and disrupting the traditional banking landscape in doing so.
Where to from here? 👀
In terms of leveraging “digital R.I.C.H.E.S”, neobanks are still scratching the surface. The Global neobanking market size is expected to reach $333.4 billion by 2026. As they expand and grow their services beyond simply addressing their initial niches, I believe we will see the rise of more and more intuitive and contextually intelligent financial services.
matt enjoyed this piece on mental models
sash thought google uk’s new #itsokaytoask campaign was dope
karl loved beeple’s crossroad piece and the fact that no flames were depicted